1983 (11) TMI 31

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..... question has been referred to this court for its opinion : Whether, on the facts and in the circumstances of the case, the Appellate Tribunal's finding that 6% interest alone should be charged on the overdrawings of the partners is based on relevant and valid considerations and is sustainable in law especially when the assessee was paying interest at the rate of 9.5 per cent. on its borrowals ? .....

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..... st the assessment, the assessee appealed to the AAC, who found that interest had been credited to the partners on their contribution towards the capital and so the capital accounts should be left alone. He worked out the opening debit balances in the loan and annuity deposit accounts as under : ------------------------------------------------------------------------------------------------------ .....

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..... to the Tribunal. The Tribunal found that the partners had been allowed interest on credit balances in their capital accounts, that the capital accounts of the four partners had been credited with interest totalling Rs. 15,151 and that the loan taken by them in the aggregate worked out to Rs. 2,62,352. The firm also debited interest on such withdrawals and this amounted to Rs. 15,74.1. The Tribuna .....

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..... iew taken by the Tribunal, so far as it is against the Revenue. We find that the Tribunal has categorically found that the amount borrowed by the firm has not been fully and exclusively utilised for the purpose of the business. Part of the borrowing has gone for granting loans to the partners, which admittedly is a non-business purpose. To the extent that the borrowed funds have been utilised fo .....

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..... that it had been spent for non-business purposes, the interest at the rate of 9 1/2 per cent. on its borrowing alone should be taken into account, and the interest at 6% paid by the partners on their loan to the firm cannot at all be taken into account. Therefore, we are of the view that the Tribunal is not correct in holding that the interest at 6 per cent. alone should be calculated for the purp .....

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